Ukraine’s grain export: Ukrainian grain is ready to go. But ships are not. why? risk

Shipping companies are not in a hurry to export millions of tons of trapped grain Ukrainedespite a hacked deal to provide safe passages through black sea. That’s because explosive mines drift in the water, ship owners are assessing the risks and many still have questions about how the deal will be carried out.

The complexities of the agreement led to a slow and cautious start, but it’s only good for 120 days – and the clock started ticking last week.

The goal over the next four months is to get 20 million tons of grain from three Ukrainian seaports that have since been closed RussiaFebruary 24 invasion. That saves time for about four to five large bulk carriers per day to move grain from the ports to the millions of poor people around the world who face hunger.

It also provides plenty of time for things to go awry. Just hours after the signing on Friday, Russian missiles hit the Ukrainian port of Odessa – one of those included in the agreement.

Another key element of the deal provides assurances that shipping and insurance companies carrying Russian grain and fertilizer will not fall into the wider Western sanctions circle. But the agreement brokered by Turkey and the United Nations contradicts the reality of how difficult and dangerous the agreement is to implement.

“We have to work hard to understand now the specifics of how this works in practice,” said Guy Platten, Secretary General of the International Chamber of Shipping, which represents the national shipowners associations that represent about 80% of the world’s merchants. fast.

“Can we be sure and guarantee the safety of the crews? What will happen to the mines and minefields as well? There is a lot of uncertainty and unknowns at the moment,” he said.

Getting wheat and other foodstuffs is crucial to Ukraine’s farmers, who are running out of storage capacity amid a new harvest. This grain is essential to millions of people in Africa, parts of the Middle East and South Asia, who are already facing food shortages and, in some cases, starvation.

Ukraine and Russia are major global suppliers of wheat, barley, corn and sunflower oil, as fighting in the Black Sea region, known as the “breadbasket of the world”, has pushed up food prices, threatening political stability in developing nations and leading countries to ban some food exports. which exacerbated the crisis.

The agreement stipulates that Russia and Ukraine will provide “maximum guarantees” for ships making the journey across the Black Sea to the Ukrainian ports of Odessa, Chernomorsk and Yuzhny.

“Obviously the primary danger we face will be mines,” said Monroe Anderson, head of intelligence and co-founder of Dryad. The maritime security consultancy works with insurers and brokers to assess the risks ships may face along the way as the naval mines that Ukraine has planted to deter Russia drift away.

The Turkish Defense Minister said, on Wednesday, that demining is not immediately necessary, but that plans can be made if a mandate is issued at a later time.

Ukrainian officials hoped to resume exports from one port within days, but also said it could take two weeks for all three to start operating again. Experts in Ukraine are working to determine safe routes for ships.

In the meantime, shipowners, charterers and insurers are trying to understand how to implement the deal in real time.

“I think it’s going to come down to the position of the marine insurers who are providing war risk and how much they would add an additional fee for ships to go into that area,” said Michelle Wise Buckman, who is in charge of shipping and merchandise. Analyst in

List, a global freight newsletter.

Buckman said ships carrying this type of tonnage typically have between 20 and 25 sailors on board.

“You cannot risk their lives without something tangible and acceptable to ship owners and charterers to transport grain,” she said.

Oleksiy Melnik, an analyst at the Kyiv-based Razumkov Center Research Center, said safety issues remain largely unresolved because Russian missiles can hit grain storage depots and ports.

“Ship owners and insurers are afraid, they haven’t received any reliable security guarantees,” Melnik said.

“We only see words and promises that have no value in wartime,” he added.

Marine insurers contacted by the company declined to comment on whether they would provide coverage for these vessels.

The war wreaked havoc on world trade, stranding more than 100 ships in many ports of Ukraine.

Data from Lloyd’s List Intelligence showed that at the three ports included in the export agreement, 13 bulk carriers and cargo ships were stuck in Chornomorsk, six in Odessa and three in Yuzhny.

Some of these ships may still have crews on board that can be mobilized to begin exporting grain.

Ukrainian traders were able to send some grain across the Danube, which helped boost exports to around 1.5 million tons in May and up to 2 million tons in June, although this is still less than half of the 4-5 million monthly grain shipments. . tons before the war, according to Svetlana Mallich, Black Sea agricultural markets analyst at Refinitiv.

During the 2021-2022 marketing year, Russia exported about 30 million tons of wheat, according to Refinitiv trade flows. This is the lowest level since 2017, in part due to the horrific impact of the sanctions. Mallesh said Russian fertilizer exports also fell 25% in the first quarter of the year compared to the same period last year.

For ships bound for the three ports in Ukraine, smaller Ukrainian pilot boats will guide ships through approved lanes. The entire process, including the scheduling of ships along the route, will be overseen by a joint coordination center in Istanbul staffed by officials from Ukraine, Russia, Turkey and the United Nations.

Once the ships reach port, they will be loaded with tens of thousands of tons of grain before leaving again for the Bosphorus, where representatives from Ukraine, Russia, the United Nations and Turkey will board the ships to inspect them for weapons. There will likely be inspections of ships bound for Ukraine as well.

Since the process is so complex and slow-moving, it is not likely to have a significant impact on grain prices worldwide.

“The balance of power in this agreement remains with Russia,” said Anderson, head of intelligence at Dryad. He said any Ukrainian ports outside the agreement faced increased risks of being attacked.

“I think what Russia wants … is to be seen as the country that controls the narrative within the Black Sea,” Anderson said.

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